HP CEO Meg Whitman: 12 Signs HP Is Starting The Year Off Right

Not Ready To Declare Victory, But Signs Of Progress

As HP enters the third fiscal year of a five-year turnaround plan, HP CEO Meg Whitman said that the computer giant is making progress. Here are 12 signs that HP is starting off the year right, based on a CRN interview with Whitman and her comments with analysts after HP posted better-than-expected first fiscal quarter results.

Growing Faster Than Cisco In Switching

Networking grew 4 percent year over year [in the quarter] and switching grew 5 percent relative to Cisco, who shrunk 12 percent in that same category. I am feeling pretty good about the hardware business. There has been a big boost from the channel in that regard.

Cisco is a great company. They have done a marvelous job over many years. But they are facing some of the same challenges as all big-cap technology companies. We started our transformation, our journey to the new style of IT, two years ago. And they are waking up to that same reality.

Ready To Gain Share From IBM's x86 Server Sale To Lenovo
With the IBM-Lenovo deal, I know better than most in a very personal way that instability is hard on these big businesses.

So as IBM sells their business to Lenovo, that is instability. And the channel partners are betting on road maps, future investments. They are counting on stability and, when there is a big move like this, no one really knows what is going to happen as that business moves to Lenovo. So we want to make sure that we capitalize on that as HP. We are committed. We have got a road map. Partners know the management team and have a lot of confidence in us. We are the paragon of stability.

Dell's Leveraged Buyout Effect

Dell going private is a big change. When you go private, obviously the whole game is you have to pay down the debt. How do you pay down the debt? You improve earnings. How do you improve earnings? You skinny down on costs and people, and you have to be very careful. It is hard to know exactly what is going on at Dell. What we do see is we have a lot of Dell resumes at HP. A lot of Dell resumes at HP.

Robust HP Commercial Personal Systems/Printing Business

A shout-out to [HP Executive Vice President of Printing and Personal Systems] Dion Weisler (pictured) and his team as they continue to execute. Our multi-OS, multi-architecture multi-form-factor strategy is working well.

Commercial notebooks grew double digits [in the quarter]. We haven't seen commercial notebooks grow double digits in, I don't know how long, eight or nine or 10 quarters. There was also strength in our workstations, strength in the printing business. Officejet Pro and Officejet Pro X are doing incredibly well. Our big multifunction color printers grew 25 percent year over year. That is almost exclusively a channel product.

The Enterprise Group Turnaround Is On Track

We are turning the Enterprise Group around, and you can see it in the revenues and the success in ISS [industry-standard server] revenues [up 6 percent] as well as networking [up 4 percent] and storage. 3Par would be the standout. 3Par grew over 70 percent year over year.

Every time we sell storage and networking [as part of converged systems], that is margin accretive to HP versus our classic ISS business.

We have got the right people on it, and I think you will see margin improvement over the course of the year if the market holds up and we can continue to execute.

The Channel Is Embracing HP Software

One of the things I am excited about is the channel is beginning to embrace software. As the channel is starting to figure out how they plot their next growth avenue, they are increasingly selling ArcSight, TippingPoint, Fortify, Vertica, Autonomy, our IT operations and management software. We are seeing more and more partners get interested in the software part of the business.

Margins are going to be under pressure in the hardware business. The way our partners are going to have to navigate through that is value-added services and software.

HP Is Ahead Of Competitors In Shift To New Style IT

We are seeing acceleration in the industry's movement toward that new style of IT.

These changes create tremendous pressure in the marketplace as technologies and business models evolve, customer needs change and incumbents look to respond. Many of our competitors are now confronting these new realities by making major strategic shifts and exiting significant parts of their business. At the same time, HP is more than two years into its work to reposition the company to meet these challenges. We believe this is a competitive advantage. With the steps we have taken, I think we are well positioned to seize on opportunities that will arise in the marketplace.

New Innovation Bets: Network Functions Virtualization

It turns out NFV [Network Functions Virtualization] is going to be the next big change at most of the major telcos, and we are really well positioned here. So we said this is a bet we should make. We look at all of the major new proposals around innovation and then we place the bets. We have a lot of technology expertise at this company. This has been one of the things that has been a joy about coming to HP. The technology expertise and depth at this company is remarkable -- not only at HP Labs, but any part of the company.

A More Sharply Focused R&D Effort

We are spending more [on R&D] but what is really important is we are spending a lot more against the things that matter. The R&D budget was very diffused.

And so what we did is we said, 'Let's see where we want to make bigger, more important, bets as opposed to a peanut butter R&D allocation. Where do we really want to make the bets? And so we narrowed the focus.

So we have taken a huge chunk of the HP Labs budget and said let's do a small number of things really well.

New Innovation: Channel Updates Are On the Horizon

We are not taking our foot off the pedal. Over the next few quarters, we will introduce significant new innovations that will build upon our offerings in cloud, security, big data and converged infrastructure, as well as some remarkable new technologies in printing and personal systems. In addition, at our Global Partner Conference next month, we will roll out updates to our partner programs that we expect will further strengthen our channel relationships.

HP Is Now Eyeing Small To Midsize Acquisitions

As this market changes very dramatically, you can see that we may need acquisitions in security, big data, mobility and cloud. We will be very judicious. It will be returns-based, and I would say it would be small to medium-size acquisitions, so that's where we are headed.

I would say particularly within cloud and then big data, we have got very compelling offerings. This hybrid cloud offering that we crafted well over a year and a half ago, it's the right answer.
I can tell you every single day customers say that is exactly what I want.

Confidence In HP Is Back Among Customers, Partners And Employees

We have strengthened our relationship with customers and channel partners, something I see every day in my interactions with them, and our global workforce is fully aligned behind the common vision of the company, delivering solutions for the new style of IT.

Our folks are showing up happier, more motivated, more confident. Most everyone who works at HP loves technology. So it is very fun when you have a new converged infrastructure offering for the channel or you have CloudSystem 8 or you have something that can make a difference to our collective customers.